Apparently the Fed is loaning out money at 4.93% and paying 5.4% in interest. Banks have noticed and are getting the free money while they can. From the article: ...
Apparently the Fed is loaning out money at 4.93% and paying 5.4% in interest. Banks have noticed and are getting the free money while they can. From the article:
The Bank Term Funding Program, which supported lenders through that tumult, “really was established as an emergency program,” said Michael Barr, the Fed’s vice chair for supervision, at an event Tuesday. The BTFP, which is slated to expire March 11, has attracted a swath of users in recent weeks as traders look to lock in loans at a rate that’s more attractive than the alternatives.
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Usage of the program — which allows banks and credit unions to borrow funds for up to one year, pledging US Treasuries and agency debt as collateral — reached a fresh high of $141 billion in the week through Jan. 3, according to the latest Fed data.
That’s because the BTFP rate, calculated as the one-year overnight index swap rate plus 10 basis points, has come down as traders boosted bets on more rate cuts in 2024. Eligible institutions have found it cheaper to borrow cash through the nascent facility, paying about 4.93%, with the opportunity to park that cash in an account at the central bank that earns 5.40%.
Apparently the Fed is loaning out money at 4.93% and paying 5.4% in interest. Banks have noticed and are getting the free money while they can. From the article:
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